MS&AD insurers target $175m Tomoni Re 2024 Japan multi-peril cat bond

MS&AD Insurance Group Holdings is back in the catastrophe bond market and seeking a $175 million or bigger multi-year source of multi-peril Japanese catastrophe reinsurance protection for its two main Japanese insurance carriers, through a Tomoni Re Pte Ltd. (Series 2024-1) issuance, Artemis has learned.

Sources told us that the Japanese insurance group is seeking catastrophe bond coverage across three Japanese perils, on both a per-occurrence and aggregate basis with this new Tomoni Re cat bond deal.

Tomoni Re Pte Ltd. is a Singapore based special purpose reinsurance vehicle that was registered in 2022 for the MS&AD group’s last catastrophe bond deal.

This will now be the third cat bond issuance in a row from the MS&AD group insurers to have been issued out of Singapore.

With this new transaction, Tomoni Re Pte Ltd.  will issue two tranches of Series 2024-1 catastrophe bond notes, one to provide reinsurance protection to ceding insurer Mitsui Sumitomo Insurance Co. Ltd. and the other to benefit Aioi Nissay Dowa Insurance Co., Ltd.

The first tranche of Series 2024-1 notes on offer from Tomoni Re Pte Ltd., are a $75 million Class A tranche which will provide Mitsui Sumitomo Insurance Co. Ltd. with a source of Japanese typhoon and Japanese flood reinsurance protection, on an indemnity and per-occurrence basis. This protection will run over a four-year term to the end of March 2028, we understand.

The $75 million of Class A notes come with an initial attachment probability of 1.72%, an initial expected loss of 1.45% and are being offered to cat bond investors with spread guidance in a range from 3% to 3.5%, sources said.

The second tranche of Series 2024-1 notes on offer from Tomoni Re Pte Ltd., are a $100 million Class B tranche that will protect Aioi Nissay Dowa Insurance Co., Ltd. and are structured to provide both a source of per-occurrence and aggregate coverage, within the same tranche of notes.

The Class B notes will provide indemnity and per-occurrence reinsurance for Japanese typhoons and floods over the four year term, and also rolling 3-year aggregate reinsurance for Japanese earthquake losses as well.

The aggregate cover therefore sees two 3-year risk periods over the four-year term and we’re told there is a JPY 80 billion franchise deductible for earthquakes to qualify under it.

Because of this two-section coverage under the Class B notes, they have both occurrence and aggregate metrics, with an initial attachment probability of 1.36% and expected loss of 1.31% on the occurrence wind and flood side, and an initial attachment probability of 0.37% and expected loss of 0.32% on the quake side.

The combined metrics for the Class B notes are an initial attachment probability of 1.7% and an initial expected loss of 1.6%, while the notes are being offered to cat bond investors with price guidance in a range from 3.75% to 4.25%, we are told.

With this second Tomoni Re catastrophe bond out of Singapore, MS&AD is broadening its coverage to include quake risks as well, while also using a novel structure to provide this efficiently across a shared occurrence and aggregate limit through the Class B notes.

Two years ago, MS&AD’s first Tomoni Re cat bond sought to push boundaries a little, with two series of notes launched, one to provide the same two insurers with occurrence cover and the other aggregate, with both series focused on Japanese typhoon and flood risks.

In the end, those aggregate notes were not issued, as cat bond investors did not have an appetite for aggregate wind and flood coverage at that time.

With this 2024 issuance only targeting earthquake cover on an aggregate basis, while wind and flood is occurrence based, it will be interesting to see if this is better received (which seems likely to be the case).

You can read all about this new Tomoni Re Pte Ltd. (Series 2024-1)  catastrophe bond and every other cat bond transaction ever issued in the extensive Artemis Deal Directory.